Don't hold your breath

The world's biggest economies have no immunity to a virus that began in individuals but now infects the business psyche. Hamish McDonald reports from China on the worsening global outlook.

Travel agent Shen Chen has had some unusual emails in the last few days at the big Taikoo-CITS agency in Beijing that caters to an upmarket clientele of foreign law firms and multinational companies. They come from the head offices of these clients, telling the agency not to sell tickets to local staff if they want to go to the southern Chinese province of Guangdong, Hong Kong or Singapore.

International schools in Beijing and other Chinese cities have meanwhile seen a quiet exodus of students, as families leave early for the Easter break, with the US and some other foreign embassies and big oil companies authorising special leave allowances.

Many foreign residents are disturbed that if they come down with an illness, they will not be treated at one of Beijing's foreign-staffed international clinics and hospitals, but will be transferred to a special medical facility for foreigners that will be opened at the Beijing University Medical Centre.

On Wednesday, James Salisbury, an American academic teaching in the special trade zone of Shenzhen, died while being transferred to nearby Hong Kong after unsuccessful treatment in the local hospital, one of China's best-equipped. A visiting International Labour Organisation official, Pekka Aro, 52, from Finland, died last Sunday in a Beijing hospital.

The big American retail chain Wal-Mart, which buys about $US15 billion ($24.7 billion) worth of Chinese products each year, on Wednesday banned its employees from travelling to China and a handful of other Asian countries. The World International Property Organisation this week became the latest group to postpone a big convention in China. Luxury hotels that used to be crammed with foreign buying teams and technical experts are down to 20 per cent occupancy.

This week, despite bold calls by Government ministers that the outbreak of severe acute respiratory syndrome was "effectively under control", the SARS epidemic started having visible effects on the vast Chinese economy.

China's image has had a sudden switch. Since the 1997 Asian financial crisis it has been nudging Japan aside for regional economic leadership, having refused to devalue its currency and kept up a fast 8per cent annual growth that has sucked in raw materials, intermediate products, and services from other Asian countries. Now it is the shadowy breeding ground of dangerous new diseases, protected by a secretive regime that would rather save face than save lives.

Despite a tightening of the "great firewall" run by China's security apparatus, the internet buzzed with more and more lurid accounts of alleged SARS victims piling up in closed-off state hospitals. One rumour that hit Australia even had Chinese medical teams administering lethal injections to stop the epidemic.

The credibility of Chinese health authorities was not helped by the letter circulated by the retired head of surgery at a Beijing military hospital, Dr Jiang Yanyong, reporting colleagues as saying the number of SARS patients in one military hospital alone was three times the total reported by the Health Ministry for the entire city.

The ministry gave conflicting statements about whether military hospitals were included in its figures, and then suggested Jiang might be referring to patients suspected of having SARS and close relatives being kept in isolation. The official figures say China has had 1290 confirmed cases of the 2700 worldwide, with 55 deaths.

Nowhere is the distrust greater than in the economies that have pinned the most on affinity to China - Hong Kong and Singapore - where the SARS epidemic threatens to slam down their GDP growth rates by 1.5 percentage points this year, according to estimates by investment banks and government agencies. The two aviation hubs have seen airlines cut flights overall by 20 per cent.

The slogan Hong Kong's tourism authority was considering for a promotional campaign this year - "Hong Kong will take your breath away" - has become a black joke for a territory of 7 million people where the numbers of SARS infections and deaths keep rising, despite stringent precautions in one of the region's best medical systems and draconian public health measures, including quarantining an entire housing block.

Singapore's hotel occupancy rates have dropped from nearly 70 per cent to about 30 per cent over the past three weeks from the effects of the war in Iraq and the SARS outbreak. Singapore Hotel Association's chief executive, Pakir Singh, is calling it "a desperate situation". Fear of the lethal pneumonia, which has infected 126 people and killed nine in Singapore, has affected the island-nation's economy in many other ways. Passenger traffic on its subway system is down 14 per cent in the past week.

Neighbouring Malaysia, which has had only one SARS death so far and two dozen suspected cases, said on Thursday it would stop issuing tourist visas in China and allow government and business visitors to enter from China only if they had medical certificates saying they did not have the illness. Chinese tourists accounted for 500,000 of the 13 million visitors to Malaysia last year. The $US11.2 billion pumped into the economy made tourism the second biggest foreign currency source.

China's own tourism authorities, however, are still vigorously promoting international and domestic travel for the annual weeklong May Day holiday at the start of next month. "We don't expect any negative impact on the May holiday tourist flow," said an official at the Beijing Tourism Bureau. "We expect the number of people coming in and out of Beijing to reach 2 million, compared with 1.8 million last year. The SARS epidemic is under control by the city government - Beijing is safe because all the SARS cases are imported."

The May week is one of three weeklong breaks formed from combining various separate public holidays that the Chinese Government is using to stimulate domestic consumer spending, and help keep GDP growth at a level that can soak up the country's vast pool of underemployed rural and industrial workers. Beijing targets growth of 7 per cent this year, but the SARS epidemic is likely to shave this by at least 0.3 points, according to the merchant bank Citibank SalomonSmithBarney.

Many health and economic analysts think it is a miracle that the spring holiday week in early February - when the initial SARS epidemic was raging in Guangdong - did not see the virus carried through China by migrant workers returning home to visit their families. An alternative explanation is that many cases have been unreported, as the Chinese health system has all but collapsed in rural areas and does not extend to migrant workers without resident cards in the cities, leaving huge numbers of people to treat themselves with herbal medicines or over-the-counter drugs.

As the Government continued with the gamble of encouraging May Day travel, a pervasive campaign is building up to beat the SARS epidemic by heightening hygiene awareness. Leaflets and posters urge citizens to wash hands, disinfect surfaces and avoid coughs and sneezes while building up their resistance with a number of traditional remedies for respiratory illness, such as "kangbingdu foufuye" based on the root of the indigo plant. Staff of government offices are being told to bring their own cups for mass doses.